EU Rules Germany’s Casino Tax Schemes Breach State Aid Regulations

The European Commission has determined that Germany’s special tax arrangements for public casino operators violate EU State aid rules. Following a comprehensive investigation initiated in December 2019, the Commission found that these tax schemes conferred an economic advantage on certain operators, distorting competition within the European Union.

Investigation and Allegations

The investigation was prompted by complaints from competitors of public casinos in Germany, alleging that the special tax schemes, varying by Bundesland (State), provided preferential treatment to these operators. Under these schemes, public casinos (Spielbankunternehmen) benefited from tax exemptions that replaced standard corporate or income taxes and local entertainment levies.

Commission Findings

The Commission’s probe revealed that these tax arrangements indeed provided public casinos with a potential economic advantage by lowering their tax burden compared to what would be under normal tax rules. Although the advantage was not automatic and varied by year and operator, recent adjustments in certain States were identified as potentially exacerbating this advantage.

Remedial Measures and Legal Framework

In response to findings from Hamburg, where a new equalization tax was introduced starting January 1, 2024, to offset any undue advantage, the Commission acknowledged this step as a measure to prevent further state aid breaches in that region.

Recovery and Future Steps

As a consequence of these findings, Germany is now obligated to recover the incompatible state aid from the beneficiaries, along with accrued interest. The exact sum to be reclaimed remains unspecified pending further assessment by German authorities to determine the extent of advantage granted to each operator.

Compliance and Implications

Under EU regulations, State aid is deemed illegal if it meets four conditions: funded by state resources, confers selective economic advantages, distorts competition and affects cross-border trade. The purpose of recovering illegal aid is to restore fair competition within the EU’s internal market by nullifying any competitive advantage enjoyed by the beneficiaries.

Germany has been instructed to revise its tax policies for public casinos to align with EU standards, ensuring compliance with fair competition principles across member states.

Source: EC Europe EU